tv Bloomberg Technology Bloomberg June 5, 2019 11:00pm-12:00am EDT
♪ taylor: i am taylor riggs in new york in for emily chang. this is "bloomberg technology." coming up in the next hour, big tech in the firing line of the u.s. government. apple and google face new scrutiny over the dominance of their app stores and the fees they charge to developers. plus, are drones the key to amazon locking down its deliveries? we take a look at the ecommerce giant's plan. and going the distance. peloton files its ipo paperwork,
but does the home exercise startup have enough demand in the public market? but first, to our top story, our continued look at the u.s. government's antitrust investigation into big tech. and we are looking at one market dominated in particular by apple and google, specifically app stores. together they run the world's two biggest app stores, accounting for more than $100 billion last year. apple has 45% of the market and google that 25%. -- at 25%. the two control more than 95% of all mobile app spending by u.s. consumers. now apple's ceo tim cook denied that his company has any sort of monopoly, telling cbs news that "i don't think anybody reasonable is going to come to the conclusion that apple is a monopoly. our share is much more modest, we don't have a dominant position in any market. you know our share of smartphones in the u.s. is typically the high 30's.
on pc's, it is much lower than that." joining us to discuss is john burkey, the ceo and founder of brighten.ai software company, specializing in artificial intelligence for autonomous vehicles. before that he served on the siri advanced development group at apple. i know we have been talking about the app store. first let's take a step back and walk me through why these companies have a monopoly, and make your case for why they should be broken up. john: yeah of course. i think the market share numbers are really interesting. within the enterprise local market, where a lot of the value is, the apple market share, if you know, sort of google it, it is quite a bit higher than 30%. when i did my research, it was 85%, 90%. i am not a statistician, but these are big numbers. and i think also you have to look at the 30%. there is no cost basis to the 30%.
and you have to ask yourself why google and apple both have the same rates, and are they really competing or is it sort of an agreement that we are going to charge 30%, everything is going they are making big money out of -- everything is going to be good? as you know they are making big , money out of this and until this moment, nobody has really pressed very hard. taylor: talk me through what is the standard, if you will. i mean even on the government's website, they say being a monopoly is not illegal. these companies have every right to pursue aggressive pricing in order to maintain a monopoly and really only until consumers get hurt is it a problem. are consumers getting hurt? amazon arguably has been lowering prices for consumers. what is that like? john: it is a good question. to your point, amazon is another thing. google and facebook and those companies are little different too.
those are more like advertising companies. talking about apple, i think the thing is they didn't -- they have done really well back in the old days. when i was there the first time, we were almost dead. it was the mid-1990's and a lot of guys are still there from those moments and have done really well. a lot of the reason why this is complicated for them emotionally is they are not used to being in this dominant position. the question is for a company like spotify, should they be paying apple probably more than they pay the u.s. government? right, because apple gets 30% of revenue, not 30% of profit? there is no deductions. if you are spotify, it seems rough to compete with your competitor and hand them 30% of your cash. so i think that is, sort of to put a fine point on it, there are some cases like that. in terms of customers being harmed, without putting to e a point onoo fin
this you see a lot of companies , like netflix rearrange their whole way to charge customers just to get around the apple tax, and that's kind of strange. we all want to concentrate on making great products for the customer. if apple didn't have that big tax, netflix and the other companies would make it easier to purchase their products. taylor: given your history and experience with apple, what does sort of an apple breakup look like to you? is it separating of hardware and software, how does the app store come into play? what are the concerns of how apple could be split up if at all? john: yeah you are going to make , me really popular with my friends at apple. taylor: that's our job here. john: in these cases, i think there is a lot of remedies. you can imagine for example after some discussion, these companies just agreeing to lower their prices, their percentages. or you could say, does apple really need to have the app store? right?
apple could be asked to let go of the app store and be the platform company, just not do the store and not charge that percentage. then they could have some other model. you could see that could happen. i don't think that would be particularly damaging to apple. in fact, if there is a market for app stores, that would be super interesting. one of the things we noticed when we use the app store is it is not particularly good at what it does. it is hard to find products if you don't know what you are looking for. you can imagine if there were more specialized app stores, that might be a better place. so. taylor: john, generally speaking, what does this mean for the future of innovation? i am thinking of a small company who expects that in a few years, they could be looked at being bought out by a big company like an apple or an amazon. does this make them more nervous about developing the big innovation if there isn't a good exit path for them? john: good question. you know, honestly i think both the companies that you are talking about will not in the
foreseeable future have an issue with cash. you may remember a few years ago during one of america's financial crises, apple had more money in the bank than the united states of america. i think it will still be true, there will be plenty of money to purchase startups. i think on the other side with a couple of changes, maybe there will be more open markets for smaller companies. some of the things apple does as part of its muscle memory to protect -- which is a really good muscle memory. one of the things i want to say about this week is apple came out really strong about privacy, and i am personally really proud they did that. as you know not everybody does , that. this is clearly in tim's dna. i think that is really good. i think some of that muscle memory is a bit overprotective. we all do that with our children and other things. right? apple could open and make it a little easier to do some of these things. there is a bunch of cases that are kind of technical around
services and apps and things, but you could actually have a more innovative place. taylor: i spoke with scott galloway, a professor at nyu who has studied a lot of these big tech companies. he made sort of a bold prediction that within the next five to 10 years, we really could see smaller six to 10 companies. through your research, do you have any idea of how many companies this could be? are we looking at potentially up -- that what could be potentially up to 10 different companies? john: i think it's a good question. when you look at the remedies for a company like google or facebook, you could see those being split up into separate companies along with some remedies around -- i think in facebook, you could see digital accounting stepping in, a company like pwc providing audits so that user data is handled better. you can see that maybe that would be split. i think you have to begin with the end in mind. what do we want? i think we want -- we are proud
of these amazing companies. they are a big part of why america is so strong today. we don't want to wreck that, but we also want to continue to have innovation. right? we are all struggling, america, with this digital divide. not just inner cities and others, but also mainstream america that is out in the middle of iowa. part of the stuff we are talking about is how to make that continue to be better. because we know that one of the things we are worried about with a company like amazon is that whole thing we call the walmart effect. these big companies can accidentally make small main streets worse, they can accidentally shut down stores. they don't mean to do these things. part of the remedies we have seen in the past are things like the cable companies, the phone companies are forced to run lines out to the country, so every american gets a chance. right? you could see that happening with some of these things, too. so you could see splitting off from the big four, big five. eight,ld see yeah, sure, 10. you could see at a second level,
you know maybe you have four or , five app store companies. maybe aws is no longer part of amazon. who knows? but i think all of us americans, we do like capitalism -- not all of us but capitalism is a good , thing generally. so what, we want it to work. we have stories from our history books where a big company got too powerful. think i said, apple is i one of those cases where they have done really well. we should let them have a victory lap, then we should find a way -- it is like playing checkers with your kid and you are doing too well, so you back off. you know some of those cases are , for apple, they can just change the field a little bit, right, make it a little more open. taylor: wonderful insights, thank you. that was john burkey, ceo of brighten.ai. good insights there. now youtube is cracking down on videos that promote hate speech and extremist content.
the alphabet-owned streaming company says it will prohibit videos with white supremacist, neo-nazi, and conspiracy theory content against well-documented events such as holocaust deniers , and sandy hook truther videos. the move comes as critics have continued to mount that youtube is not doing enough to keep those videos from coming online. coming up, if amazon gets its way, you may no longer be looking out your window for the delivery van. instead, you might be looking up to the skies. that's next. this is bloomberg. ♪
giant enabled a new ai enabled drone to be used in deliveries of small goods. amazon says it will be built with components designed to meet faa regulation. back in april, alphabet subsidiary wing became the first drone company to win faa approval to operate as a small airline and is planning its own delivery test. joining us to discussed is bloomberg's regulation editor, jon morgan. and on the phone, tom forte, a senior research analyst at da davidson. thank you for joining me, tom. give us an update on what we know about the drone so far and more importantly in your research, how this fits into amazon's overall strategy. tom: sure. so going back in time when amazon first talked about drone delivery on a network television show, our viewpoint was they were trying to basically break the duopoly of fedex and ups, to
the extent of that we saw and still see the cost of delivery as the achilles' heel of amazon's business model, to the extent that fedex and ups are able to raise their rates every year, even during the great recession. the fact it has taken years to get this far and now we are this far essentially a beta test for drone delivery, suggests that the technological hurdles and the regulatory hurdles are still quite significant for this rollout. i do think when you think about its ability to empower one-day delivery and its ability to offset some of the pressure from fedex and ups this is an , important issue from amazon. taylor: john, you heard tom on the phone talk about regulatory hurdles. we do know they need regulatory approval. any indication of what the timeline for that might be? jon: no, they have been working behind the scenes. we know that the federal aviation administration gave
them permission to do testing. they are still a ways off from coming up with the complete regulatory passage that will govern how the business will be conducted. but like as often happens in the industry, policymakers let the technology evolve, then come along and set some rules for the road. so far we don't know when that is going to be done, but they are working on it. taylor: tom, talk to me about how this fits overall in amazon. we talk about their high-growth profit margins, like amazon web services. how does this drone sort of fit into your overall thesis for the company? where do you expect it to start to make money? tom: sure. absolutely. to the extent amazon is able to deploy technology to materially improve shipping costs, i think this is a big profit-generating opportunity for amazon. and if you look at their recent performance, what you are seeing is an increasing mix of third-party unit sales on the
platform, which has been beneficial to their profits as they get higher margin when someone else is on the platform and they collect a commission, rather than amazon itself. so the shipping cost -- whose profitability. taylor: jon, talk to me more about alphabet's wing. we know that back in april, that was the first to get approval. amazon really seems to trying to be playing catch-up. what do we know about how different this is from alphabet's wing and how alphabet has been leading the stage on this? jon: we have been waiting for amazon to pop up. alphabet had been more public. we saw those tests last year where they were delivering popsicles and burritos to -- and test platforms to customers. amazon, finally, the company we most associate with rapid delivery of consumer products finally has rolled out this , technology, which is somewhat different. i think the video there reflects the -- alphabet's program involved lowering the goods from a hovering drone with
a sort of a rope and pulley. amazon is taking a different approach. they are actually going to come to your lawn and land, or within a few feet of the ground. so that required a lot more technology. they have included some artificial intelligence that they say will allow them to spot clothes lines, pets and things, and land safely. taylor: tom, i finally want to ask you, in the last conversation we were talking about the probes and some of the antitrust and breaking up some of these monopolies. this of course seems to be amazon's foray into helping gain ofpricing power and sort insulate themselves from pricing pressures. is this the right move at the right time? what sort of backlash do they face now? there are some concerns about a monopoly. tom: definitely. in one paper we just published on retail and the death of amazon, one of the things we talked about was regulatory risk.
specifically, would the company be required to separate the aws unit from retail? we don't think that would affect the long-term performance of stock. you have two good stocks instead of one. to the extent that -- i think as long as amazon -- for example, they recently dropped the practice of acquiring third-party sellers to sell products at the lowest price point. to the extent this is more about enabling sales on amazon and to the extent that they offer good opportunities for third-party sellers on the platform, i don't think this would trip antitrust. taylor: wonderful, thank you. that was bloomberg's jon morgan of da davidson. coming up, e-commerce is on the rise. with that, so is the demand for warehouse space. how online retail giants like amazon and walmart are shaping industrial real estate, next. this is bloomberg. ♪
taylor: earlier this week, blackstone group announced it is acquiring 100 million square feet of u.s. warehouse space from singapore. the $18.7 billion deal is one of the largest industrial real estate deals in history, but it is also a big bet on e-commerce. this is as online retailers seek more and more warehouse space to expand their digital operations and cut delivery time. joining us now from seattle is a senior managing director ben , conwell. i imagine this is just one step in what is otherwise a much-needed trend that we have been waiting for. ben: you are right. good afternoon, taylor. thanks for having me. this is one indication one , transaction, albeit a significant one, that is consistent with what we have seen at cushman and wakefield and even nationally and even globally, of sophisticated,
institutional capital that invests in different types of real estate, making very bold, very strong moves to build their logistics asset portfolio. so this is clearly a vindication of what we see, not always at this scale, but certainly the investment thesis is the same. taylor: what types of industrial warehouses and real estate deals are you seeing the most demand right now? can you characterize it by deals that are over a certain million square feet or certain neighborhoods to speed up delivery times? what types of deals are seeing the most demand right now? ben: sure. we see it really spread across three different kinds of logistics assets. the first is that kind of building that gets so much publicity and media coverage. that's the large e-commerce fulfillment center that is 800,000 square feet, 900,000 square feet, or even well over a million square feet.
these are buildings that employ a tremendous amount of technology. they are extremely expensive to develop, and they employ a significant number of people. that's part one. part two is because successful online retailers, and even legacy physical retailers, are constantly trying to bring more inventory closer to the consumer, that's driving a movement for smaller fulfillment centers, more in the range of 200,000, 300,000 or 400,000 square feet, deeper into urban areas. and then the third that probably has more buzz now than the other two is in the last mile, it is the last touch point, if you will, the last transfer point for orders through the delivery chain before they go out for final delivery to your house or
to your office. so we see investor interest in all three of those categories. taylor: ben, how has interest been recently? i wonder if we made the moves fast enough to convert what was other retail, mom-and-pop shops, over a retail store -- i mean for example i walked up 3rd avenue and an old retail shop is empty. have we converted those fast enough into repurposing them, into bringing them up to modern use? ben: it is a very hot area in the investment field right now, that conversion opportunity of taking underperforming real estate, retail, real estate assets and putting them repurchasing them for logistics, , among other users. today we are still in the very early stages of that, of logistics space available in the u.s. today. only a very very small , percentage is the conversion
of former retail assets. i think we will see more of that as we go along, and smart capital is looking hard at opportunities to invest in that conversion. taylor: ben, talk to me quickly about geographics. you are in seattle. we know big real estate prices, thanks in part to amazon. what regions are seeing the hottest trends? ben: well, we see it historically. typically we see this kind of investment interest in the major distribution markets nationally. generally ports, l.a., long beach, dallas, atlanta, miami, chicago, new york, new jersey. but with the increased demand from investment capital to find logistics assets for their portfolios, we are seeing more and more movement to what we used to call alternative cities that today are getting significant activity. taylor: wonderful, thank you.
♪ taylor: this is "bloomberg technology." i am taylor riggs in new york. the battle over trade and technology between the world's two biggest economies has entered a new phase with allegations china reneged on commitments made at the negotiating table, triggering a fresh round of tariffs and smashing months long [indiscernible] where do we go from here? we bring in the president of gulag technologies, also an advisor to u.s. congressional staff on technology and cybersecurity as a global fellow for the wilson center. ron, great to have you here. i wonder, from where you are sitting there in dc, was this the right approach to get china
to sit up and pay attention? ron: block and banning of huawei was definitely the right step for this administration. we're facing two forms of espionage, technology espionage like with t-mobile and also nationstate espionage conducted by china, so it is the right policy and was a lot of pressure on china during these trade negotiations. i am going to push back a little bit because i have heard a lot of analysts say that huawei really is a separate issue from trade, that trade and tariffs is one thing and huawei is a national security issue, and conflating the two is not appropriate. is it appropriate to be putting huawei in here to leverage for trade? ron: it is definitely appropriate because in china's case, when they perform intelligence gathering, they use it for the benefit of their companies and their economy, so
all forms of intelligence from china are definitely national security issues. and we really have not been able to do much as an industry. companies like t-mobile, people who have been victims of espionage from huawei, they do not have a lot of recourse so this is a very, very crucial thing the white house has done. taylor: you talk about how it puts pressure on china. what have you heard from u.s. tech companies in terms of the backlash they have experienced and maybe some of the pressure that they are feeling? ron: it goes two ways. not only can u.s. companies not buy huawei, but you cannot sell components. anyone who has been doing business with china has been put on notice that this is something the administration takes very seriously. it has been done on the heels such as the russian antivirus company by the u.s. government. taylor: you mentioned t-mobile and at&t, verizon, some of these
other companies. how much does this help them in the long awaited and long watched race to 5g? ron: so i think it helps u.s. manufacturers because we want to keep u.s. companies part of the 5g infrastructure, and 5g is not just a new, faster phone. it is going to change the way the u.s. uses the internet. it is going to change, for example, the death of wi-fi. you will not have wi-fi in your house. everything is going to be connected directly to the internet. banning huawei bans their components as well. cloud components as well. it benefits u.s. companies but make sure these services are done with u.s. manufacturers and u.s. businesses. taylor: we can sort of pull this into a cybersecurity conversation, and we often talk to analysts who say the next war that is fought will not be traditional war, but it will be one we play through cyber security.
what kind of conversations are you having in d.c. with congressional leaders about how we stay ahead in the cybersecurity war? ron: so when i meet with people here in washington, dc, i talk about something called the cyber poverty line, and basically it is a line where above it, you have organizations that have everything they want. they have every cyber product they ever want, and they are still not secure, so they hire hundreds, maybe even 1000 people to look for hackers and attacks that are getting through. people below the poverty line -- you know small schools, you and , me at our house -- we don't have the ability to keep ourselves that six-year. the internet is made of insecure components to begin with. on that frame, you run into heat of issues. one, keep adversaries like russia and china at pay. -- bay. two, for everyone else, we need to do education of the average citizen. most people do not know what their data is worth, or how the internet actually even works and to be able to make decisions
about what they should buy. taylor: go ahead. ron: that is where a lot of the focus is. what can we do to raise awareness in the average u.s. citizen so they can make smarter decisions in cyberspace, but also, what can we do to put pressure on china and russia to stop messing with u.s. cyberspace? taylor: i was cutting you off on the point where you mentioned that we do not know what our data is worth because that leads me to a broader conversation we have been having all week with the doj talking about antitrust probes and just some of the big tech companies breaking up what , seemed to be big monopolies. i wonder, what is your take on that? has this shown that some of these companies are unable to protect our data so really it is the government's job to step in data? tect >> i'm not a trade expert or monopoly expert but what i like to tell people is in the airline industry, there's a tremendous amount of oversight, regulation,
there is a tremendous amount of control. we are putting our lives in the hands of the airplane manufacturers. with cyberspace, we are really putting our digital lives in the hand of these organizations, sometimes for free, sometimes we are paying them to do so. and you know, what they do with that is a little bit different, so we have got to have a change. the problem is we got here over the last 20 years. and on rolling how do you separate my data from facebook or my data from linkedin or these other services is really a difficult problem, especially in the face of these new privacy regulation such as what has come out of europe, gdpr and the state of california. taylor: difficult problems with the difficult solutions and conversations. thank you. that was ron gula in washington out of gula technologies. as we have been covering on bloomberg, the house panel covering an antitrust investigation of these big technology firms. it is prepared to issue subpoenas focusing on the impact of digital platforms on news
organizations. kevin cirilli spoke with the lawmakers leading the probe that is democratic congressman. >> this is a review broadly of the dominant technology platforms in the digital marketplace, a look at how they are operating, whether or not they are providing competition, whether they are engaged in anticompetitive behavior, whether they are engaged in behavior discouraging or eliminating competitors, whether they are discouraging innovation and entrepreneurship, and if they are having privacy for users and whether or not they control -- allow users to control their own data. there is a number of issues, but this is an opportunity to use the investigative process which will involve depositions, and hearings, witnesses, if necessary subpoenas, document requests. roundtables will bring in some of the best technologists in the country thinking about what is the right response, what is the answer.
i think it is easy to identify the need to identify the -- it is easy to identify the challenges but it's hard to come , up with a solution, so we want to ensure we have the best data, the best thinking, the most accurate information. >> i am struck by this because so much of the rhetoric, there's all this different rhetoric on the right and left, but if necessary, congressman, would you change the statute? >> i think there is no question one of the things he will look at carefully is the existing antitrust statutes. rememberortant to those were drafted principally during the railroad monopolies, which is a very different economy and it might the time to update and modernize, are they working in the 21st century? what is also exciting is this is a bipartisan investigation. there's republican and democratic support for doing this in a thoughtful, responsible way. there may not be agreement with every solution at the conclusion of it, but i think people recognize it matters all across the country. taylor: that was congressman david cicilline speaking to
kevin cirilli. the u.k. government wants clarity on the u.s.'s plan to ban huawei. a u.k. delegation is headed to the u.s. to figure out how that export ban on huawei will affect companies overseas. two british officials said their government had no advanced notice of the trump administration's actions, and the ban has further delayed the u.k.'s decision on allowing the chinese company to supply 5g phone networks. britain is conducting a review of the telecom supply chain that was originally due for publication in the first quarter of this year but has been pushed indefinitely back. and coming up, melinda gates is using her platform to speak out against inequality. will other wealthy tech titans follow? this is bloomberg. ♪ >> bill and warren and i believe we should not have this in equity that exists in the united states. we need to do something about that. philanthropy with government,
taylor: the home cycling startup hello don has -- peloton has filed confidentially for an ipo. they sell exercise bikes and treadmills with tablets that stream live fitness classes. for more we are joined by a reporter. you know what what do we know so , far? from what i was looking at the statement, we did not even know the number of shares that were going to be listed, but bring us up to date. what do we know? >> we know that goldman sachs and jpmorgan are leading the field. what we don't know is that the shares, the price, the valuation.
we have heard previously it will be more than $8 billion but the more details of this deal come later but what would be interesting to see is what has been the risk factor because they recently had a lawsuit where a music label sued them for using the songs without paying royalties. there are little problems like this along the way that we should watch for, but apart from that, this is a very exciting listing. it is a brand known to a lot of people. taylor: talk to me about that valuation. a lot of the concerns with lyft and uber, a lot of the concerns were these big tech companies that frankly got above themselves and those ipo's and valuations had to come back down to earth. what does this $8 billion fund mission on peloton say about where we are now? crystal: at uber's listing, there were talks about how it was really overvalued, but today
we have seen uber coming back to its proprietary five dollars since its listing, so maybe that price after all is the true value, the true reflection of what uber is worth. it's actually more than $8 billion that they are looking at. it will be very exciting to see whether bankers are investors, how they interpret that number. but last year in the private market around $4.1 billion, so this could be a big jump from the private value. taylor: i'm sure we will be scouring through those documents and in particular one thing you highlighted was the risk factors. it makes me wonder what are those risk factors. i wonder are the competitors -- i think of a few competitors here in midtown where you can go take cycling classes, but you do not necessarily have an at-home bike. is peloton trying to get you to give up those classes to buy peloton and take those classes
at your home? crystal: in fact we actually have studios as well. peloton is trying to get consumers to get out of their home, go to the studios, and participate with other people. they are trying to get exercise time more sociable. they have corporate partnerships. they have the bikes and treadmills and hotel chains. it is not going to be -- they are going to diversify their client base, and where the bikes are going to be outside of homes. taylor: another story we have been following is in shanghai where the shanghai exchange has approved three new companies for this new tech board. what is a tech board? crystal: it is the chinese version of the nasdaq. chinese resident xi jinping mentioned this in a summit for himself. for china, it is a mission they need to complete and need to do well. so far we are seeing for the
first time, they have approved three applicants, and most of the applicants in the pipeline are hardware companies, not really the internet, but good revenue, good profit so potentially will be good first batch of candidates. taylor: certainly a lot going on in the tech world. thank you. that was bloomberg's crystal tae. meanwhile, melinda gates sat down with david rubenstein for a wide-ranging conversation about the foundation and its $50 billion in assets. plus how she has tried to keep her children grounded amid their wealth. and once she met her husband and microsoft founder bill gates. take a listen. david: when did you first meet bill? melinda i met bill three weeks : into my job. i had never been to new york city. i had never hailed a cab. microsoft sent me to new york for a business meeting. my female roommate -- microsoft used to make you have a roommate when you are traveling on the road.
my female permits and when you are done with business across town, come to dinner after the meeting. i came late from the meeting i was at, and i sat down, next chair was empty. 10 minutes later, bill came in, sat down next to me. and so that is when i met bill, first three weeks into the job. david: and he said wow, how about getting to know me better? melinda he sort of said a bunch : of us are going out dancing tonight, why don't you come? i actually set i had other plans with somebody i knew from his new school tonight. and then back at microsoft, a few months later, everybody back then used to work late on friday nights, quite late on saturday, 3:00 or 4:00. so my car was parked next to his in a parking lot. and he struck up a conversation, and we talked for a while, and then he asked me if i would go out with him eventually -- this was a saturday. two weeks from friday night. and i said two weeks from friday night? i was 22 years old.
i was like i have no idea what i'm doing two weeks from friday night. i said that's not quite spontaneous enough. and he said, ok, can i take your phone number? so he did called me about an , hour later and asked if this is spontaneous enough for you how about tonight? , then he said but i have a user group meeting at a dinner i have to go to, so how about a glass of wine downtown? i thought a saturday night, but i agreed to meet him for a glass of wine. that was our first date. taylor: you can watch the full interview with melinda gates on the david rubenstein show tonight, 9:00 p.m. in new york on bloomberg tv. and still ahead, hp's lawsuit against autonomy founder mike lynch is heating up. we will discuss the latest image file next. this is bloomberg. ♪
taylor: oracle announced wednesday that it has secured a cloud computing alliance with microsoft. the partnership will help oracle preserve its database fitness and make software applications more attractive to companies that may be considering the move to microsoft. similar partnerships have helped microsoft thrive as the number two provider of cloud storage behind amazon. former hewlett-packard ceo meg whitman gave her first testimony in the company's lawsuit against autonomy founder michael lynch. hp is suing lynch over claims he regularly inflated his company's sales. in court wednesday, whitman said she was prepared to throw her predecessor under the bus for the failed autonomy deal. this is in reference to an email from 2011 where she said she was happy to do it in a tit-for-tat. she told the court it was a moment of anger and disappointment about what happened here, and "i should not have said it."
joining us to discuss is bloomberg's niko grant in san francisco. just give me the latest. i have not been following this case. what new did we learn today? >> so thank you for having me. meg whitman said out loud what one could surmise she would think privately, and that is what is so unusual because she does have this reputation for being mostly conservative and very calm and rational in her demeanor, but basically, we got inside today into just how dysfunctional hewlett-packard was in the time around the deal and just after, when it was making a transition from the other ceo to whitman. in particular we learned the board was very dysfunctional. on whetherad wavered it was a good idea for hp to buy autonomy, and then also insight
into what happened when meg whitman started to look at this software asset her predecessor had bought, and this was the beginning of the end for mike lynch, who was then fired by meg whitman. taylor: talk to me more about the dysfunction between the executives and the board. i believe i read they had unanimously approved the deal, but then of course under the papers a little bit, you read about more skirmishes that were happening. how dysfunctional was this board at the time? nico: hp's board was infamously dysfunctional around this time. this is a board that have fired carly fiorina years before, then fired mark hurd over an expense issue. this was a board that, from ,eporting that i have done really was interested in seeing hp be this big supermarket of a tech company in which it could own any type of asset and sell
it to its customers, so there was great interest particularly during the former hp ceo's tenure for hp to be this ibm-like business that could sell software, but then, when it turned out that this was a bad deal, and autonomy was a paper tiger, that's when the infighting began. and the question became, you know, how can we spread this blame? and of course whitman, even though she had to clean up the mess, also had some measure of blame because she was one of the directors on the board of directors at the time. taylor: any backlash from meg whitman today? nico: none that i can say. i think that meg whitman at this point is sort of earned her reputation for better and worse, but right now, she's focused on running this new micro entertainment competitor to netflix. and so i haven't seen any
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